By Michael Aneiro

Puerto Rico’s nonvoting congressional delegate today introduced legislation in the U.S. House of Representatives that would allow Puerto Rico’s government-owned corporations to file for Chapter 9 bankruptcy protection, the same type of municipal bankruptcy protection Detroit sought last year. The move comes a month after the commonwealth passed the Puerto Rico Public Corporation Debt Enforcement and Recovery Act, which allows Puerto Rico’s public corporations to restructure their debts.

“I believe that amending the U.S. Bankruptcy Code to extend Chapter 9 to Puerto Rico is the most sensible and logical way to proceed,” wrote Pedro Pierluisi, Puerto Rico’s resident commissioner. “My legislation would simply enable the Puerto Rico government to authorize its government-owned corporations to utilize the tried-and-true Chapter 9 procedure if it becomes necessary, under the expert supervision of an impartial federal bankruptcy judge, based on legal precedent established in Chapter 9 proceedings that have taken place throughout the nation.”

The fallout from the Recovery Act continued today as Standard & Poor’s banished the Puerto Rico Electric Power Authority to the depths of speculative grade, cutting PREPA’s credit rating to triple-C from single B-minus. (S&P also affirmed Puerto Rico’s general obligation bond rating at double-B.) S&P said the deep-junk rating indicates that PREPA’s debt is “vulnerable to nonpayment,” and said any adverse business, financial, or economic conditions could leave PREPA unable to pay its debts.

“We believe that the absence of an overarching solution to liquidity issues and the structural imbalance among its revenues, operating expenses and debt service commitments suggests an increasing likelihood that the authority will not be able to satisfy debt service obligations on time and will avail itself of the [Recovery Act] and restructure all or portions of its debt,” said S&P credit analyst Judith Waite in a statement.

Earlier today, PREPA sent out a statement saying its lenders have extended until Aug. 14 their agreements not to exercise remedies against PREPA as a result of the recent credit downgrades. Under the agreements, PREPA can continue to delay certain payments that were due in July while still making payments due to employees and suppliers. PREPA said it’s “having productive discussions” with its creditors and will continue “to evaluate various strategies” to achieve its financial and operational objectives.

“This latest show of support from our bondholders, bond insurers and lenders provides us with additional time to evaluate all available options to ensure we are reaching the best possible outcome for our employees, customers, creditors and suppliers,” said PREPA Executive Director Juan F. Alicea Flores in a statement.

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JULY 31, 2014 5:26 P.M.

Bud U. wrote:

Looks like Meredith Whitney may have been a bit prescient? Whose next? Chicago?

SEPTEMBER 20, 2015 11:45 P.M.

Richard Lawless wrote:

Redacted SEC Question

Hegan – Berman appears to have had the information on the $100,000,000 a year theft for an extended period and didn’t report it to the SEC, FBI, U.S. Attorney or the EPA. During that period we continued to accumulate millions of dollars in losses.

Isn’t it a crime to have knowledge of a felony and not report it. A lot of people were damaged why they sat on this? I see in the press that they are already shaking down the defendants for more information and money in confidential settlement talks.

Hegan is working hard to get their tens of millions in legal fees (confidentially) why the rest of the victims continue to get damaged. Seems really screwed up. Hegan and Berman has also refused to assist anyone outside of their lawsuit. No sharing of information.

We know how PREPA killed the 15 billion in projects but it doesn’t make sense until your marry it with the $100,000,000 a year theft. Put the two together and it makes perfect sense. We went to them with our concerns many months ago and they blew us off.

Amey Stone is Barron’s Income Investing blogger and Current Yield columnist. She was formerly a managing editor at CBS MoneyWatch, MSN Money and AOL DailyFinance. Her responsibilities included overseeing market coverage and personal finance topics. Prior to those roles, she was a senior writer at BusinessWeek where she authored the Street Wise column online and contributed to the magazine’s Inside Wall Street column. Topics covered included economics, corporate finance, Fed policy, municipal bonds, mutual funds and dividend investing. She co-authored King of Capital, a biography of Citigroup Chairman Sandy Weill. She is a graduate of Yale University and Columbia University’s Graduate School of Journalism.